Working from home has become increasingly common in recent years. The rise of remote work provides flexibility and other benefits for employees.
However, working from home also comes with tax implications that employees should understand. As a work-from-home employee, you may be eligible for certain tax deductions that can help lower your taxable income and save you money at tax time. In this blog post, we will share 16 potential tax deductions for remote employees.
16 Potential Tax Deductions for Remote Employees
1. Home Office Deduction
One of the most valuable deductions for remote workers is the home office deduction. To qualify, you must use a specific area of your home exclusively for work on a regular basis. Calculate the deduction by determining the percentage of your home used for business purposes. You can deduct that percentage of home-related expenses like rent, mortgage interest, property taxes, insurance, utilities, and repairs.
2. Internet and Phone Service
If you use your home internet or phone for work, you may deduct a percentage of the costs. Calculate the deduction by estimating the percentage of use that is business-related rather than personal.
3. Computer and Office Equipment
Computers, printers, scanners, desks, chairs, and other equipment used for work in your home office are deductible. You can either deduct a one-time amount in the first year or spread deductions over several years through depreciation.
4. Work Supplies
Deduct expenses for paper, pens, toner, postage stamps, and other supplies used in your remote work.
5. Co-Working Space Rental
If you work from a co-working space or rented office outside your home, you can deduct a portion of the rent and amenities fees.
6. Online Services and Subscriptions
The costs of online services and subscriptions like video conferencing tools, cloud storage, online fax services, and more that support your work can be deducted.
7. Mileage for Work-Related Driving
Track mileage for any driving related to work duties, such as to an office, client meeting, or supply shop. Deduct mileage at the current standard rate, which is 58.5 cents per mile for 2022.
8. Travel, Lodging, and Meals
When travel is required for work, deduct expenses for airfare, lodging, meals, and incidentals like taxis and tips. Per diem rates may simplify tracking for frequent work trips.
9. Self-Employment Tax
Remote employees may need to pay self-employment taxes for Medicare and Social Security. You can deduct half of the self-employment tax paid from your income.
10. Health Insurance
If you pay for your own health insurance as a remote worker, deduct the premiums. Health insurance for dependents may also qualify.
11. Retirement Account Contributions
Contributing to a Traditional IRA, Roth IRA, SEP-IRA, or Solo 401(k) lowers taxable income. Make sure to follow limits and eligibility requirements.
12. Student Loan Interest
Up to $2,500 of student loan interest paid may be deducted per year, subject to income limits. This applies to loans for you, your spouse, or dependents.
13. Home Security System
If a security system is used exclusively for your home office, it can be deducted. This includes monthly fees, repairs, or improvements.
14. Continuing Education
Deduct expenses for courses, conferences, certifications, and training that maintain or improve work skills or knowledge.
15. Uniforms and Special Work Clothes
If required to wear a uniform or buy specific clothes or footwear for your remote job, deduct the costs. Normal everyday clothing doesn’t qualify.
16. Tax Preparation Fees
The cost of tax preparation and advice is deductible, including fees paid to a CPA, accountant, enrolled agent, or tax preparation software.
Tracking Expenses
To claim these deductions, be sure to keep thorough records like receipts, invoices, mileage logs, etc. Consult IRS Publication 587 for details on recordkeeping requirements. Take advantage of all eligible write-offs to maximize savings as a remote employee. With proper documentation, these 16 tax deductions can significantly lower your tax bill.
